09/11/2017 - Political Turmoil Weighs Down the Pound

GBP

Sterling saw losses yesterday as investors continued to express their concerns over the ongoing political instability in the UK as well hints that Brexit talks are not going as planned.

Yesterday, the weakness in the pound was driven by accusations against various members of the conservative cabinet after international secretary Priti Patel was summoned back to Downing Street from her trip to Kenya and Uganda. It was revealed she attended a number of undisclosed meetings with senior Israeli officials including Prime Minister Benjamin Netanyahu with who May held a meeting with last month.

The political turmoil comes after a group of "large financial institutions with big London operations" on Monday warned US commerce secretary Wilbur Ross that the lack of progress in the ongoing Brexit negotiations may force them to give up on the UK and move business overseas in the near future.

Executives from some of Wall Street’s biggest banks met Ross for lunch on his visit to London where they vented their frustration at Britain’s troubled exit from the EU and also warned that thousands of jobs could be moved back to the US or to other parts of Europe.

The concerns are in line with those of the Bank of England after one of its deputy governors Sam Wood warned last week that 10,000 jobs could depart on “day one” after the UK leaves the EU.

May and other senior politicians are now placing their hopes on post-Brexit deals with the US and other countries outside of the bloc in order to clawback any losses resulting from Brexit.

USD

The dollar slid against other major currencies yesterday after concerns over possible delays to a key corporate tax cut which is currently being proposed by the Trump administration.

A report published yesterday revealed that Senate Republican leaders are planning to postpone the tax reforms within a year in order to comply with Senate rules. Analysts have said that any setbacks in the implementation of the fiscal stimulus are likely to weigh on the currency, as markets continue to rely on cuts to boost the economy.

The report came after a poll which indicated the U.S. presidents waning popularity which is likely to encourage congress members to oppose his plans.

Key Announcements

13.30 - USD - Unemployment Claims; Forecast at 232K against a previous of 229K